Stop Borrowing Money for School?

Q: I am almost 62 and started a PhD program in my field after being laid off in 2008, because the doctorate is highly valued in industry in my field. I have been unemployed for over two years since the layoff and have had only intermittent consulting work coming in since. I am amassing student loan debt in the amount of $21,000+ per year. It will take me five years to complete my degree, dissertation and all; so, by the time I finish, I will be $100,000 in debt; but there is no guarantee I will have an employer before then that will offset the education costs.

When I am working full-time in my field, I earn $100,000. Currently, I only owe about $21,000. Due to the lack of employment opportunities, no income whatsoever and savings depleted, I plan to apply for early Social Security benefits this year.

What do you recommend? I can still get jobs in my field without the PhD. I love my studies, but I don’t relish the idea that my Social Security would be garnished if I default on a huge student loan debt. Should I stop my losses now?

A: I’m so sorry for your situation. There’s a lot to consider, but I wouldn’t take out any more loans. Take a leave from school and find whatever work you can. As you said, there’s no guarantee you will get a job that could service $100,000 student loan debt.

Think about it. Even if you got a higher-paying job, the extra money (the difference between a job with the PhD and without) may be just enough to cover the loan. So, you would be working to cover a loan and not really getting ahead. And, you are right that, if you default, the lender could attack your Social Security benefits.

Cut your losses now.

And, by the way, whatever you do, don’t go into default. If you don’t go into default, you should qualify for IBR (income-based repayment), which will help set your loan payments based on your current income. If you don’t have much, your payments won’t be much. IBR is available to all student loan borrowers with federal loans who have high debt relative to their income. Go to the IBR info Web site to learn more.